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Ex-AIG Exec Is Indicted

Milton faces fraud charges related to the accounting scandal. Three ex-Gen Re execs are also named.

A federal grand jury has indicted a former

American International Group

(AIG) - Get Free Report

executive on charges arising from the accounting scandal that led to the forced resignation of Maurice Greenberg.

Christian Milton, AIG's former vice president for reinsurance, and three former

General Re

executives were charged with taking part in a fraudulent scheme to manipulate AIG's financial statements. The grand jury charged the defendants with securities fraud, conspiracy to commit securities fraud and causing false statements to be made to the

Securities and Exchange Commission


Milton is the first top AIG executive to be charged in the accounting scandal that led to a massive management shakeup at AIG.

The former Gen Re executives indicted by a Virginia federal grand jury are Ronald Ferguson, the reinsurer's former CEO; Elizabeth Monrad, the company's former CFO; and Robert Graham, a former Gen Re assistant general counsel. The SEC filed its own civil fraud charges against the defendants.

Federal prosecutors contend Gen Re participated in a scheme to prop up AIG's stock price by masking declines in its claims reserves and massaging quarterly earnings. Authorities contend the primary purpose of the transaction was to add $500 million in "phony loss reserves" to AIG's balance sheet to quell Wall Street criticism.

AIG, in an undisclosed side agreement, paid Gen Re a $5.2 million fee for putting the deal together. Gen Re is a division of

Berkshire Hathaway


, the publicly traded investment vehicle of Warren Buffett, who hasn't been charged with any wrongdoing in the probe.

Prosecutors have been investigating the deal for nearly two years. A year ago, they secured guilty pleas from two former Gen Re executives, including Richard Napier, a former Gen Re senior vice president

Authorities have alleged the Gen Re transaction began with a phone call from former AIG Chairman and CEO Maurice Greenberg to Ronald Ferguson, who was then Gen Re's president. The SEC complaint contends it was understood by Ferguson that AIG wouldn't assume any actual risk in the deal.

No criminal charges have been filed against Greenberg. But last year, New York Attorney General Eliot Spitzer filed a civil fraud suit against AIG and Greenberg over allegations arising from the manipulation scheme.

Spitzer's office and AIG are believed to be nearing a settlement.

The Wall Street Journal

has reported the company could pay $1 billion in fines and restitution to settle the matter with Spitzer and the SEC.

But Greenberg, once a titan in the insurance business, has said he intends to fight the civil charges.